Exploring Nepalese Market with potentiality of High Produced Commodities

When we, in any way, try to discuss with the young generation of Nepal about the potentialities Nepal has regarding the development approaches- the answers are frustrated. They find nothing potential in the country but Is that true? Well, the data shows it is not. We will look into few data here which shows that Nepal carries a huge potential in agricultural sector but then whether the government or the individuals are ready for it. This is a million dollar question for us. Yes, changes have started- usually newspapers come up with news that people have returned back from gulf countries with commercial agro-skills and have started practicing it here and secondly, news of preparation of Agriculture Development Strategy by government come up providing a glimpse of affirmative hope. 

Figure 1: Agro-Productions of Nepal, 2011 (FAO)

 Source: http://faostat.fao.org/site/339/default.aspx

Look at the statistics provided by the Food and Agriculture Organization (FAO), the graph shows that Nepal has a whole lot of potential to produce both essential and commercially tradable agricultural products but has been unable to do so. The reasons could be many ranging from lack of sufficient government initiative in agriculture promotion to lack of public interest in producing agricultural commodities commercially- but whatever it is; the ultimate sufferer is the economy and people. The above figure shows the overall production pattern of Nepal and from that we can easily understand that Nepal needs to really work on the construction of profitable portfolio regarding the type, production and value of agricultural commodities. As per FAO, top five productions of Nepal are Rice & Paddy; Vegetable fresh nes; Indigenous buffalo meat; Buffalo milk, whole, fresh; and Potatoes. Rice, paddy and vegetables are all the undervalued agricultural products which cannot generate higher revenues. Buffalo meat, fish, etc. all from the animal husbandry which is not yet well-flourished in the country. Fisheries are gaining speed in the economy due to its higher revenue generation but animal husbandry has not been able to do so due to obvious reasons. 

Why I have been so emphasizing in agriculture is that for the development of a LDC like Nepal, agriculture is the key weapon. The reason being around 65 percent of people are involved in the agriculture occupationally but have been contributing less than 35% to the total GDP of the country. Besides that, a rural-dominated country it is and only a hand-full of people reside in the urban part of the country. When we are talking so much about the agriculture in the country, we must feel proud to say that we are the largest producer of Mustard Seed in the world as per the FAO in 2011 but the problem still remains that the total value of the product is very low.

 Source: http://faostat.fao.org/site/339/default.aspx


Now, I would also like to talk about the popular agricultural commodities of the country these days. Time and again we read various newspaper articles reflecting their perceptions on to what should have their policies been and what impacts could be expected. You may not believe your ears, there are many such products but here I am going to discuss about the four major targeted and identified agricultural commodities of the country namely- Ginger, Lentils, Tea and Cardamom. We feel proud to say we are the third largest producer and exporter of Ginger in the world and we should also feel glad to know that we rank 6^th in the Lentil export globally. Here we will try to know why Nepal is not being able to upgrade itself in the lentil production and how much of potentiality has the country to develop to attain similar positions in the export of trade of tea and cardamom. We would try to figure out why the import of the country is 88.7% of the total trade volume compared to a mere 11.3% of export volume. Here we encounter an important question- Are we promoting imports and not encouraging exports?

Source: http://faostat.fao.org/site/339/default.aspx 

We see that we are after India and China in the production of Ginger whereas we follow Canada, India, Turkey, Australia and USA in the production of lentils. Not bad, the only requirement now is that we get focused on to develop a competitive edge in at least these few products where we are competing with the world.Along with the above mentioned encouraging news, we will also find discouraging corners about our current trading scenario when our trade deficit has increased to Rs. 385.29 billion and the ratio of export to import is 1:7.8 in the first nine months of the FY 2069/70 as per the data released by Trade and Export Promotion Center (TEPC) in the country. 

We already know that we have many problems juggling around that are hurdle to our agriculture development and ultimately economic development but through the data provided by TEPC, we will try to analyze few more dimensions of trade imbalance in our country.

Here, I would introduce the data by TEPC for the analysis:

Source: FY 2069-70 Nine Months 13, TEPC 

The last four columns have been added for the analysis. Let us fist deal with the negative figures we see in the table above. In case of lentils, we can see that the production has decreased by 17.33 percent due to which our economy lost almost Rs. 498 billion. When lentil has been identified as one of the major edged products of the country, why did the production go down? Here, the export price is said to be Rs. 121.13 per Kg but the retail price of the product almost revolves around Rs. 150 in the market. The middle men are earning hugely in the market. We did not evidence any adverse natural phenomenon this year so farmers might be on the disadvantaged side by producing lentil, that’s why production had decreased. The stats show how important can lentil is to our economy, so government has to come up and has to come up fast with the producer-friendly policy and not the middlemen-friendly policy. Cardamom, another much highlighted product of the country, also lost its production by 2.21 percent incurring the loss of almost Rs. 59.5 billion to the economy. There is a huge mafia working with cardamom sector in the eastern part of our country, the production basket of cardamom. We might get surprised to know that due to the cross-border trade in that region, people happen to buy Nepali cardamom as Indian products. And when we look into the price difference, here the export price is Rs. 661.34 per kg but the market here in Kathmandu has the cardamom price between Rs. 1000 and Rs. 1200 per Kg. Again the same concern, see what the middlemen earn. Tea exports are okay and the most exciting Ginger trade, we boast about these days, the ginger production has increased by 242.72 percent. This is the interest we would like to see both in government and the public regarding the product cultivation. Talking about the prices, it is a human nature trying to create monopoly in the market for excess profit which government has to look upon, the export price is less than Rs. 20 whereas the market here itself is around Rs. 100.Actually, the government only has to ensure the fair price to the ginger producers and we will observe the production shift vividly.

Its high time government starts thinking about licensing the commodity exchanges to act as institutionalized middlemen replacing several layers of individual middlemen prevalent in the market currently. These price differences justify why farmers get so demotivated about producing the produces efficiently, their return is very low. Even in the case of ginger, we hear news of farmers who are exploited by paying them much lower prices than the market price, and poor farmers have to sell that because that is the only means of family feeding. Government and the bureaucratic level in our country have to stand tall and think big about introducing policies which are beneficial to public rather than themselves. There must be executions of warehouse policies to store the product value and earnings become sure. Insurance Board has to tighten the insurance bodies making them insure the agricultural produces too. Nepal Rastra Bank has to come up with a policy to identify the warehouse receipt as collateral similar to the shareholder’s certificate which will be a valuable asset for the grass-root level farmers. The concept of AIS (Agricultural Information System) should start up and start up well in a full-fledged way and the malpractices should be penalized. If agriculture, in a commercialized form of course, is our key to development, farmers, the key-holders, have to be nourished well.

Note: This article is published in the New Business Age.